Bragg v. Kirksville Packing Co.
| Decision Date | 13 December 1920 |
| Docket Number | No. 13499.,13499. |
| Citation | 226 S.W. 1012,205 Mo. App. 600 |
| Parties | BRAGG v. KIRKSVILLE PACKING CO. |
| Court | Missouri Court of Appeals |
Appeal from Circuit Court, Adair County; J. A. Cooley, Judge.
Action by A. L. Bragg against the Kirksville Packing Company. Judgment for plaintiff, and defendant appeals. Reversed.
Higbee & Mills, of Kirksville, for appellant.
Chas. E. Murrell and W. F. Frank, both of Kirksville, for respondent.
This is an action bottomed on fraud and deceit. On September 23, 1918, plaintiff subscribed for 10 shares of stock in the defendant corporation at $30 per share, paying $50 in cash, and executing his note at 60 days for $250, in payment therefor. On December 20, 1918, he brought this action to cancel the subscription and note and to recover the $50 cash paid. Judgment in the trial court was for plaintiff.
It may be stated, by way of history leading up to the transaction involved, that the defendant company was incorporated July 16, 1918, with an authorized capital stock of $166,500, one-half of which was paid in in property consisting of about 55 acres in the northwest part of the city of Kirksville, on which there had been erected a large fireproof brick building fully equipped with machinery and appliances for a packing house plant. There was also a large frame building which had been used by the Burk Bros. Meat & Provision Company, which company was incorporated in July, 1908, with an authorized capital of $20,000, one-half of which was paid up. September 30, 1909, the capital stock was increased to $70,000, for the purpose of erecting the brick building. Its assets were erecting the brick building. Its assets were then valued at $55,000 and its liabilities at $25,000. In 1910 it erected this two-story fireproof brick building with basement at a cost of $28,000, and equipped it as a packing house plant. It could kill from 150 to 200 hogs and 50 cattle per day. It never had any working capital, but incurred a large indebtedness in erecting this building and installing machinery. Its name was changed to Kirksville Packing Company. It was operated in a small way on borrowed capital, always finding a ready market for its products. In five or six years it paid off its indebtedness of about $20,000. In May, 1917, a meeting of the stockholders was called to consider a resolution for the dissolution of the corporation.
In July, 1917, Mr. B. H. Stephenson acquired a controlling interest in the corporation, and he and his associates took over its management. The company had to borrow its working capital. It was unable to supply the demand for its products because it had no capital to buy live stock and adequately carry on its business. Pursuant to a resolution of the stockholders, the corporation was dissolved, and the new company incorporated July 16, 1918; one purpose being to enable it to increase its capital stock. The property of the Kirksville Packing Company was taken over by the new corporation at $83,250 as appeared by the articles of association duly recorded. It was first appraised by competent appraisers. The fireproof building was appraised at $42,000, the equipment at $22,000, the 55-acre tract at $21,100 (one appraisement being $20,500), and an eight or ten room frame residence and four lots at $4,000, making a total appraisement of $85,100.
One Masterson was employed to sell the 3,330 shares of capital stock at $30 per share. He employed E. J. Hayes and other agents, the purpose being to sell the stock as rapidly as possible, in blocks of 10 shares, to farmers in order to interest them in the enterprise. The sales began late in August, 1918, and continued until in November, when they aggregated about $22,000, on which small cash payments were made and short time notes were taken for the balance.
On September 23, Hayes sold plaintiff 10 shares of stock, he paying $50 in cash and giving his note for $250. Plaintiff knew the company intended selling all of this stock to raise capital to operate the plant.
From the finding of the trial court it appears that the false representations charged against Hayes in inducing plaintiff to enter into the contract purchasing the stock were reduced down to one, viz., fraudulent statements of value of the corporate property. The evidence justified the court in throwing out other causes, and plaintiff in his brief joins in this view when he says:
"The false representations as to value was not only one of the moving causes to plaintiff's action, but no doubt was the prime moving cause of same."
Plaintiff testified that at the time of this transaction he was 60 or 61 years old, a stock raiser, and had lived in Adair county all his life a short distance from Kirksville, which was the county seat. He traded in that town and went there on an average of once a month. Besides other acquaintances, he knew all the merchants and bankers. He knew defendant's plant, frequently sold defendant or its predecessor live stock, and had been through the building, especially the killing department. The land (55 acres) on which the plant stood was in the northwest part of the town. He further testified that he and Hayes were strangers, and he makes no claim to any trickery or devices to keep him from making any inquiry he liked before subscribing. It is not pretended that Hayes himself was an experienced man in the packing business or a competant judge of the value of such plants. He was merely employed by defendant to sell stock.
As we have said, plaintiff knew the plant; but, if he desired further information, he knew the business men of Kirksville and, of course, could have obtained it. He testified that he did not know the number of acres of land and did not ask Hayes.
We have only to determine whether the evidence shows a fraudulent representation of that value, as recognized by familiar rules of equity, and whether defendant relied upon such representations, was deceived thereby, and had a right to rely upon them under rules of equity.
In arriving at a proper judgment, it will be well to remember that when one seeks to cancel his solemn contract on account of the fraud of the other party, no half-hearted, halting, evasive evidence will answer; his proof must be "so clear, definite, and positive as to leave no reasonable ground for doubt." Jackson v. Wood, 88 Mo. 76, 78. "In general, the cancellation of an executed contract is an exertion of the most extraordinary power of a court of equity, which ought not to be exercised except in a clear case, and never for an alleged fraud, unless the fraud be made clearly to appear." Cohron v. Polk, 252 Mo. 261, 281, 158 S. W. 603, 609.
Now in our view no fraud was shown. As we have said, the only representations which figure in the case relate to the "amount and value of the property owned by the defendant." In showing such representations it must likewise appear that they were relied upon by plaintiff and induced him to make the contract; that he was not on equal footing with Hayes; that he did not know and had no reasonable means of ascertaining the condition or value of the plant, and, with all, that they were not mere expressions of opinion. And we may here remark that running all through plaintiff's statement, brief, and argument, both written and oral, is the idea that a case is made for him if a preponderance of the evidence shows that too high a value was set on the plant. We may properly say that stopping at such showing the case is not more than half made. A vital part of a case of this nature is to show that plaintiff was fraudulently imposed upon; that he was led astray, knew no better, and had no means of informing himself. It must be borne in mind that this is not an ordinary case of one resisting payment for something he did not get. It is an action to annul a contract, where, as we have said, the scienter is a main essential to be established by the most cogent proof.
On this head plaintiff testified that Hayes said the fixtures and plant and land were worth $166,500, though they were appraised at half that sum; that he (plaintiff) did not know how much the plant and land were worth, nor how much land there was, and did not know the value of land, buildings, or machinery; that he relied on what Hayes told him. Again, he testified that Hayes told him the "capital stock was $166,500 and was a good investment and a man couldn't lose anything." Again, he said:
"I thought it would be a great thing for the county and for us farmers to have a packing plant to unload our hogs and cattle, that we would have a market at home." That the reason he bought was to help out the county and himself, and was not for the purpose of making money on the stock.
The court asked him:
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